The National Board of Revenue has collected Tk 6,577 crore in source tax from bank depositors with a significant growth at 16.18 per cent in the last fiscal year 2018-2019.
Depositors paid Tk 5,661 crore in tax on profits and interest derived from deposits maintained with banks and non-bank financial institutions in previous FY 2017-2018, according to the data of the revenue board.
Tax collection from the sector rose by three and a half times in last 10 years from Tk 1,846 crore in FY2009-10, officials said.
They said that collection from the sector grew significantly in FY19 due to rise in the amount of deposits, number of depositors and rate of interest after slower growth over the last few years.
Depositors having taxpayers’ identification numbers were to pay income tax at source at the rate of 10 per cent on interest and profits gained from savings deposits, fixed deposits and any term deposits maintained with the banks and any non-bank financial institutions.
The rate of tax was 15 per cent if the depositors did not have TINs. The NBR, however, deducts the tax at 10 per cent, irrespective of having TIN or not, on profits gained from saving deposits of which balance does not exceed Tk 1 lakh at any time in the year.
According to the Bangladesh Bank data, deposit growth in the country’s banking sector was 9.8 per cent in the calendar year 2018.
Income tax collection from bank deposits grew 46.37 per cent in the FY13, the highest in the recent history, after the NBR increased the tax rate to 15 per cent for depositors not having TINs.
After three years in FY16, the collection growth dropped to negative 14.13 per cent due to liquidity crisis in the banking sector.
Tax collection grew by 4.56 per cent and 3.79 per cent in FY17 and FY18 respectively, according to NBR data.
The majority portion of the earnings came from deposits in the banking sector, officials said.
They said that total amount of deposits increased in the last year as the rate of interest started to rise in the year.
They said that, in many cases, depositors furnished fake TINs to banks while opening the bank accounts to avoid the additional tax imposed for not having TINs as the banks did not have to mechanism to verify the authenticity of the TINs.
The amount of tax would be much higher if the TINs could be verified, they said.
The revenue board, however, has been facing criticism for taxing at higher rates on depositors not having TINs as the provision forces small depositors to pay tax at higher rate whereas the tax-free income limit was Tk 2.50 lakh.
Earlier in 2015, then finance minister AMA Muhith sought opinion from NBR on giving exemption to the small depositors from paying tax from the income on their deposits below Tk 5 lakh in savings accounts.
The NBR had opposed the minister’s idea fearing huge amount of revenue loss as, it found, around 96 of savings accounts holders at that time had balance of less than Tk 5 lakh.